The South African rand spent the better part of the Asian session trading on the back foot on Tuesday, as the dollar was broadly trading stronger. Although intraday activities, along with the opening of the American session saw the rand better bid against the greenback, retracing all the day’s losses to end the session firm. The local unit initially rose to a high of R15.1175/$ before retracting its losses to reach a low of R14.9250/$, and finally closing the day at R14.9400/$.
The rand continues to carry the burden of Africa’s most industrialized economy daily, with the country’s economic backdrop posing a serious threat against the rand’s market resilience. The rand has long benefited from global markets positioning for a speedy economic recovery on the back of the expected $1.9 trillion US stimulus and successful vaccination programs around the world. Although rising US yields and concerns over inflation crushed the party for the local unit and other EM’s.
Locally we have no significant data for today, as such the local unit will most likely continue to take its cue from international data and other market-moving events.
The dollar retreated yesterday as US bond yields came off from recent highs amid concerns that too high yields could undermine financial stability and the current recovery path, supporting dollar weakness as the safe-haven currency lost its allure and global risk appetite picked up again. The dollar index traded a low 90.726 just before ending the session at 90.762.
The pound continued to trade lower in the first half of the session as the market still favoured the dollar, but managed to bounce off lows to almost trade flat towards session end as Finance Minister Rishi Sunak pledged to protect the UK economy from pandemic ramifications. The pound weakened to $1.3858, then strengthened to $1.3975, and ended the session at $1.3966.
Similar to the pound, the euro was weaker in the first half, but rebounded in the second half as risk appetite picked up on the back of a weaker dollar. Despite marginal gains, the euro is not out of the woods as next week’s ECB meeting is yet to give clarity on the Eurozone’s plans to address the issue of high borrowing costs due to higher yields. The single currency weakened to $1.1991, then strengthened to $1.2093, and ended the session at $1.2088.
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